Is this the end of the LA Clippers-Sterling saga?

Dan Eaton, partner at Seltzer Caplan McMahon Vitek and professor at San Diego State University

Published 2:57 PM ET Mon, 2 June 2014
CNBC.com

It appears all but certain that the NBA Board of Governors on Tuesday will approve the sale of the Los Angeles Clippers by the Sterling Family Trust to former Microsoft CEO Steve Ballmer. A critical legal question is whether the terms of the trust and applicable principles of probate law authorized Rochelle Sterling, Donald Sterling's estranged wife and co-trustee of the Sterling Family Trust, to act alone in making the deal with the NBA to sell the team due to Donald Sterling's diminished mental capacity.

If Mrs. Sterling had such authority, the sale of the team would be considered a voluntary transaction. That would mean there would be no vote to force the Sterlings to sell the team.

Getty Images

Chris Paul #3 of the Los Angeles Clippers drives on Klay Thompson #11 of the Golden State Warriors in Game Four of the Western Conference Quarterfinals during the 2014 NBA Playoffs at ORACLE Arena on April 27, 2014 in Oakland.

The lack of such a vote would rip the heart out of Mr. Sterling's billion-dollar lawsuit against the NBA. Mr. Sterling and his lawyer would have to drop those claims that depend on the sale being forced or face punishment if they don't — and this time, the punishment would be imposed by a federal judge, not the NBA. (The separate privacy claim Mr. Sterling asserts in his complaint seems a reach, among other reasons, because the NBA didn't illicitly record Mr. Sterling's comments.)

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But would a voluntary sale end this saga altogether? And would such an outcome make what has transpired in this matter over the weeks since Mr. Sterling's vulgar, racist private and public remarks irrelevant should something like this occur again? The bad news is that, without Mr. Sterling's surrender, the answer to the first question is "no." The good news is that, regardless of the answer to the first question, the answer to the second question is also "no."

Let's deal with the bad news first. The voluntary sale may not extinguish Mr. Sterling's right to challenge, as a breach of the NBA's contractual obligations to him, the $2.5 million fine and lifetime ban that Commissioner Adam Silver assessed against Mr. Sterling personally. The deal Mrs. Sterling made with the NBA reportedly requires her and the Sterling trust, of which Mr. Sterling remains a beneficiary, to pay to defend the NBA in any lawsuit by Mr. Sterling against the league and to pay any damages in the unlikely event that he wins.

Mr. Sterling is a lawyer and a businessman. Unless the indemnification agreement were invalidated, Mr. Sterling would have to be completely irrational not to realize that such a fight would make no sense. Then again ...

Now, the good news. The chain of events over the last few weeks that led to the sale of the Clippers will influence similar events that may arise in the future even if the NBA Board of Governors does not take the formal step of forcing the sale of the team for Mr. Sterling's misconduct. No, there would be no binding precedent in the way that we lawyers use that term in the sense of a formal ruling by a decision-making body. But Webster's gives a more generic, and in this case infinitely more useful, definition of precedent: "an act or instance that may serve as an example or justification for subsequent situations."

A precedent has been set that the league will impose swift and severe punishment, up to and including the commercial equivalent of capital punishment, for comments or actions that are fundamentally inconsistent with the league's values and injurious to the league's interests.

A precedent has been set in this age of social media that private comments and conduct, inside or outside the arena, are fair game for such punishment.

A precedent has been set that the interests of all of the stakeholders in the enterprise matter in how such things are handled — from the team's employees to the team's coach to the team's players to the community on whose support the success of the team and league depend to the brightest star on a distant team.

Even if Mr. Sterling finds some measure of vindication in the courts and the league is found to have overreached legally in some way, these precedents will endure. And these are the precedents that were always going to matter most.

Commentary by Dan Eaton, a partner with the San Diego law firm of Seltzer Caplan McMahon Vitek where his practice focuses on defending and advising employers. He also is a professor at the San Diego State University College of Business Administration where he teaches classes in business ethics and employment law. Follow him on Twitter @DanEatonlaw.